FINRA Targets Brokers with a History of Disclosures
As the securities industry regulator, FINRA, looks at new ways of cleaning up the brokerage business, it has zeroed in on “rogue brokers” as being responsible for a disproportionate number of infractions and instances of misconduct. FINRA has been motivating a new rule that would target a few hundred individual brokers who have checkered backgrounds by forcing firms that employ them to heighten supervision of high-risk financial professionals.
Brokerages that Hire High-Risk Brokers Will Need More Supervision
According to FINRA, around 2% of all registered brokerage firms would be affected by the new rule. The rogue brokers have been identified for the most part using public information, especially disclosures on their CRD reports. The CRD report is an in-depth history of a registered financial professional’s employment background, including disputes with customers, arbitrations, and terminations. FINRA has said that it is above all focused on disclosures as a way of ferreting out brokers who pose the greatest risk to investors.
Broker Employment History Available Online
What FINRA is doing is looking for patterns among bad brokers is not unlike what our securities litigation team does when assessing a new case. Often before anything else, we will examine a broker’s BrokerCheck report to see if the alleged misconduct that has been brought before us matches a pattern in the CRD report. Many times, there is a match. FINRA’s preemptive actions would hopefully protect investors from adding one more grid to the ongoing pattern of deception and misconduct by a bad broker. However, investors should remember that, just like our firm and FINRA, you can scrutinize a broker’s background using the same tools. The FINRA database is publicly available for all to see. Unfortunately, investors often see the pattern too late.
